Monday, November 14, 2011

Club of Rome came calling to India

It was quite a name to drop in the 1970s and part of 1980s -- Club of Rome -- and its thesis of 'limits to growth' that was also the title of report that the club prepared to bolster their argument backed by impressive statistics. Earth's resources are running out, we are using them up much too fast. They sounded the alarm that perennial growth is not possible. They were heard for a while but everyone went back to doing what everyone was doing -- spending more on more and more things. And more and more people were doing it. The man who put the argument much more succinctly was Ernst Schumacher with his once famous now forgotten book, 'Small is Beautiful', which became a buzz word and remained one for quite some time. But soon big and bigger became the buzzword and remains despite the market economy lying in ruins, struggling to revive.

That is what Club of Rome represents. It has chosen to come to India, holds its annual conference in a New Delhi 5-star hotel, Taj Mansingh for two days last week. Not all Indians were enthused which they would have been if the Club of Rome had turned up in India in the 1980s, and even in the 1990s. They have come to India at a time when many Indians have discovered that the westerners have nothing special about them, and that they are mired in real trouble, and that India is at last doing better than the west. Of course the irony remains that India is taking to market economy with the innocence of a child at the very time the west is licking its market wounds.

Two of the Indian participants were both sceptical and even slightly hostile. Why do not the Indian corporates who have sponsored the Club of Rome do not do the same for an Indian think tank. One of them said that it is necessary that India needs to have a credible dialogue to keep its democracy going but it is so hard to organise a public dialogue which is what is needed. But the Indian corporates show no interest. But when some western organisation like the Club of Rome comes along then the corporates only too willingly underwrite their activities. Another said that none of these westerners are to be trusted and there is nothing to learn from them anyway. This is a reaction that would not have been heard in India even in the 1980s.

One of the sessions was on the economy and the theme was: Economics: Beyond The Shortcomings of Today's Markets". The man who moderated the session was Orhan Guveren, and one of the other two speakers was the Indian economic analyst Bibek Debroy, who is also engaged in the heroic task of translating the Mahabharata into English from the Sanskrit original.

Guveren in his presentation has argue that the "world economic crisis has nothing to do with economics. It is a crisis of ethics." He explained that the European economic crisis is structural and heterogenous and that there is no compatibility in the European Union's 27 countries.

Then Guveren went on to present his abstract thesis to illustrate his argument: If you take the optimal of subsets it will not reach the optimal of the set. He said that the subset analysis approach is partial analysis.

Debroy showed his impatience and irritation and wanted to know why the hosts invited him at all. What he seems to have meant is that he is a market economist and he has no time for the laments against market. He said that problem is working within the limitations of governments. Accepting the Gross Domestic Product (GDP) had its limitations -- he was hitting out against all those silly developmentalwallahs -- and said that even Simon Kuznets, the father of the idea of National Income knew its limitations as far back as in 1938 when he propounded the idea. Debroy argued "We do not know a credible alternative to measure national income.

He posed the rhetorical question, Do we want to live in the 17th century? And answered, No. He went on to say that for him Adam Smith is not a villain. He is a hero. Perhaps Debroy did not want to look at the 'socialist' face of Smith which many scholars say there is.

He argued that developing countries are lifting themselves up. In the last 10 years 100 million people were lifted out of poverty. He said that it is not market failure, it is state failure. He expounded: Ïn India markets do not exist. Markets do not exist because state does not allow markets to function, and the state does not have the capacity to deliver.

He argued that it was inequality in access to inputs -- roads, electricity, health -- that was the problem. And he said this inequality has to be reduced. He said there will be a tendency towards inequality of outcomes. He gave the example that everyone is agreed that everyone should have access to good education, but no one says that everyone should get the same marks.